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CHAPTER 1: INTRODUCTION
1.1
1.2
1.3
1.4
MEANING
OBJECTIVE OF STUDY
METHODOLOGY
LIMITATION
1.1MEANING:
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1.2 OBJECTIVE:
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Banks:
Consumer credit is one the service-product of commercial banks. Corporate loan facility
needs lots of collaterals either tangibles or intangibles. But consumer loans are bounded
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As the loan amount is small, the banks are charging the highest interest rates in consumer
loan. Therefore, banks are getting higher profit from the consumer credit scheme.
Banks can help the people who are not able to purchase goods with their limited income
but can pay back loan with their fixed earrings.
National:
Bangladesh is a developing country. The national GDP is very low comparing to other
developed and neighbor countries. Peoples are not able to purchase consumer products as
well as other expensive products with their limited income. Banks and other financial
institute can help the peoples to change their life and living standards through consumer
loan system.
Problems with consumer loan system:
Mainly banks are facing trouble with the disbursement procedure of the consumer loan
system. We will search the problems through this research paper.
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1.3 METHODOLOGY:
1.3.1 PRIMARY DATA:
Primary data is collect from survey. The survey is purely based on customer point of view.
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1.4 LIMITATION:
Questionnaires, like many evaluation methods occur after the event, so participants may
forget important issues. Questionnaires are standardised so it is not possible to explain any
points in the questions that participants might misinterpret. This could be partially solved by
piloting the questions on a small group of students or at least friends and colleagues. It is
advisable to do this anyway. Open-ended questions can generate large amounts of data that
can take a long time to process and analyse. One way of limiting this would be to limit the
space available to students so their responses are concise or to sample the students and
survey only a portion of them. Respondents may answer superficially especially if the
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Everyone has dreams; dreams of a lovely home, beautiful car and a shining future. People
like to watch movies, listen music, travel on vacation and want education with a secured life.
This is only possible when someone have excess money to buy those products. Most of the
people do not excess money which they can save for extra. Not only in Bangladesh or in
developing countries but also in the highly developed countries people do not have excess
money to purchase their necessary products. Only the affluent peoples are able to buy those
products with their earnings. Now it is not difficult to purchase the Dreams. Banks are
providing different types of loan facilities to purchase the necessary products anytime. The
magical offer from the banks to buy dreams is known as Consumer Loan.
With the help of consumer loan people can live the life of the future. What they are planning
to purchase in future, can bring at home today. As a result, life becomes so easy that was not
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Consumer loan scheme need restructuring to help the best services to the consumers. We are
recommending few proposals for the enhancement of the consumer loan system.
From the Bangladesh Bank consumer loan guideline and the other commercial banks
consumer financing rules, we have observed that the target group they have set is as follows:
Criteria
Requirements
Age
Monthly income
: 15,000 +
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: Minimum 2 years
But the average income level of Bangladesh is much lower than 15,000. Therefore, with this
targeted income group only small portion of people will be benefited. To serve nation wide
peoples, banks must have to change their view of lending loan and to restructure the target
group as most of the earning people can get benefit of this consumer loan scheme.
Banks are now providing loan to purchase new products whether it is a car or any electrical
equipment. Banks are lending loan for recondition cars but those cars are considering also as
new. The reason is that selling brand cars are started in Bangladesh for very short time. The
main car business is based on reconditioned imported cars in Bangladesh. Banks do not
provide loan for the secondhand or reconditioned electrical equipments or used reconditioned
cars. The reason behind the behavior is the Bangladesh Banks regulations where it is
mentioned that cars loans are given to those cars which are not expired five years from its
manufacturing. In that sense when the recondition cars are imported to Bangladesh is more or
less 2 years used. Those cars remain more three years to expire from its manufacturing date,
therefore loan are given for the reconditioned cars.
Banks can take initiatives to establish a secondary consumer market where people can
purchase used reconditioned cars. Recently, there is used reconditioned cars market is started
named Garir Haat meaning Cars Fair where old cars are sold. But more structured
market is needed.
Banks are now working with many companies. If any one want to purchase any product from
any companies showroom, then banks will give loan to the customers but not in the cash
format rather in credit format meaning banks pay the bills to the companies in favor of the
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OPTION OF EXCHANGE:
Banks can extend their facilities with exchange option with consumer goods and car
companies. In that Exchange Option customers can exchange their old or used products
(Cars, electrical & mechanical equipments, apartments etc.) with the specific company. The
company may be either from where the product was purchased or any other similar type of
company of the similar products. As a result, a consumer who has an existing product but
wants to change or purchase a newer one can take this advantage of Option of Exchange
facilities.
2004
2003
137.00
108.51
91.00
77.00
88.00
71.03
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85.00
63.00
66.00
42.00
93.00
40.15
49.00
26.00
83.00
60.00
72.00
65.00
21.00
3.25
Home equity loans helps the customer to mortgage his existing property to the bank for
taking loan for some other purpose. Banks assess the current market value of the property to
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Educational qualification
Proof of business existence with business profile and last three years income tax
return
Salaried customers:
Form16
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Banks provide customers with home extension loans to extend their houses, add more rooms
etc. Such loans fall under the category of home loans.
Maximum Amount of Home Extension Loans:
Banks normally offer 70-85% of the total amount of home extension as loan. The amount of
loan sanctioned also depends on a number of factors such as the age of the applicant at the
time of loan, tenure of the loan, repayment capacity of the borrower etc.
Interest Charged by Bank for Home Extension Loans:
Rates of interest charged will be as per Bank's policy on the date of disbursement of loan.
Interest rates can be either on fixed or floating basis.
Process of Home Extension Loans Application:
Customers can fill online application forms or personally visit the bank for approval of loan.
A nominal fee of 1-2% is charged as processing by the banks.
Documents
Required
by
Banks
for
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Home
Extension
Approval:
Educational qualification
Proof of business existence with business profile and last three years income tax
return
Salaried customers:
Form16
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Owning a home is perhaps the biggest and most important dream of an average family
therefore ownership of a home goes beyond pure financial considerations. Home loans
purchase has witnessed an increase owing to competition between a number of public and
private players. The cut in the loan interest rate has also fuelled the demand for this product.
Kind of Home Purchase Loans Interest Rates:
Fluctuating Home Purchase Loans Interest rates: Keep changing with change in the
prevailing market rate or the prime lending rate.
Fixed Loans Interest Rate: As the name suggests, do not change during the entire loan
period, irrespective of the prevailing market rate. generally fixed loan interest rates
are higher than the fluctuating loan rate.
The current scenario in India is that of declining interest rate, so a fluctuating interest rate
makes more sense. The loan is repayable in the form of equated monthly installments (EMI).
The EMI should not exceed 50 per cent of your monthly household income.
Interest
Rate
on
Home
Purchase
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Loans:
Loan amount
Loan policy of different companies. Interest rates will be different for private sector
and public sector players. Companies lower the interest rates during festive seasons.
Individual loan policy of different companies. The maximum amount of loans given is
however 85% of the value of the property (inclusive of cost of land)
The term of home purchase loans offered is maximum 25 years. This again depends
on the repayment capacity of the individual
Documents
Required
for
Approval
of
Home
Purchase
Loans:
Educational qualification
Proof of business existence with business profile and last three years income tax
return
Salaried customers:
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Form16
Various private and public sector banks are coming out with attractive loan plans for its
customers for purchase of land, purchase or construction of house/flat. The loan can be taken
for both land purchase as well as construction on the land.
Eligibility for Land Purchase Loans:
Any individual aged 21 years or above having regular income is generally eligible to apply
for land Purchase loan.
Maximum Amount of Loans:
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for
purchase
of
old
house/flat/land:
Minimum 30% of Purchasing value. This value may vary from bank to bank.
Interest
on
Land
Purchase
Loans:
Interest on both fixed as well fluctuating rates are available. The actual interest rate is
governed by prevailing market conditions at the time of taking loan. Special reductions in
interest rates may sometimes be allowed for women and in other special conditions. A
nominal processing fee of 1% of amount of loan taken is generally charged by banks.
Documents
Required
for
Approval
of
Land
Purchase
Loans:
Educational qualification
Proof of business existence with business profile and last three years income tax
return
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Form16
Limited Philips
India Titan
Industries Samsung
India
Electronics Whirlpool
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. Voltas Offers engineering solutions in areas such as heating, ventilation and air
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Regulation 30:
Limits per person for such loans will be TK. 3 lacs without any securities. However, banks
may lend higher amounts provided the loans are secured appropriately. But, in no case, the
loan amount will be allowed to exceed TK. 10 lacs. The loan secured against liquid securities
shall however, be exempt this limit.
Regulation 31:
In cases, where the loan has been extended to purchase some durable goods/item, the same
will be hypothecated with the banks besides other securities, which the bank may require on
its own.
Regulation 32:
The maximum tenure of the loan shall not exceed 5 years.
PROBLEMS FROM CUSTOMER POINT OF VIEW:
As like banks, customers/clients those who are borrowing loans or wish to borrow loan have
faced some other difficulties. The major difficulties are given below:
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Bangladesh bank as well as other commercial banks has set the target group for the consumer
loan. Therefore, only that group always advertised, clicked and recalled for the consumer
loan. Other income groups are ignored. In many cases, some part of the target group are
saturated with the facilities the banks are provided, nevertheless, they are targeted for the
consumer loan as they have the ability to repay the loan back.
Many customers have complained about lack of information in the advertisement and some
found them evasive. While banks do provide much of the requested information to customers
who visit a branch personally, the vague nature of the current advertisement leads to a
problem of distrust and many consumers lose interest in the service2.
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Interviewing various banks executives, we have found out several problems with consumer
loan from banks perspective:
After that, Banks have started to survey their clients. Banks are charged 1% processing fee.
By self-surveying, banks are reduced the amount of the classified loan in this sector.
However, classified loan has been reduced but it is difficult for the banks to survey all the
clients. There are limited customers for corporate loan and the loan amount is very high. As a
result, the relations between banks ands the clients become very strong for long-term
transaction and other securities. But in consumer loan most of the case there are not any
securities. Moreover, the number of customers is high and the amount of the loan is small. As
a result, the relations between banks-clients are not high and it is difficult for the banks to
survey all the customers and theyre given information. The main reason behind the
difficulties is that there are not enough officers to survey. For this reason, many bank demotivated to promote this consumer credit scheme. Many banks have indirectly stopped this
service.
NO Security:
Most of the cases consumer loan is disbursed without any security. Therefore, the risk of
classified loan is higher in consumer loan scheme. For this reason, many banks are not
interested to disburse loan in this category.
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Purpose:
Purchase of New/second hand Four-wheeler, such as Car, Van, Jeep, etc.
Purchase of New two wheeler such as, Motorbikes, Scooter, etc.
Nature of facility:
Secured Loan (OSL)
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Eligibility:
For four-wheelers: Individuals having minimum annual income of Rs.2.00 lakh. For
determining eligibility, quantum of loan, the income of spouse, major children including
unmarried daughters, supporting the borrower financially, can be considered.
The
person/s whose income is/are included for the above purpose shall join the transaction as
additional surety/ies. Agriculturists are eligible.
For two-wheelers: Individuals having minimum annual income of Rs.0.50 lakh.
Quantum:
For four-wheeler:
a) 95% of on-road price (inclusive of Insurance, Road Tax and Registration charges) of
the vehicle for new car and accessories (the cost of accessories is limited to a
maximum of Rs.10000/-) or three times the gross annual income, whichever is less.
b) 70% of value of the Car (as valued by approved valuer) for 2nd hand car of not more
than 5 years old or 3 times gross annual income or Rs.3.00 lakhs, whichever is less.
For scooters / motorbikes:
a) 95% of on-road price (inclusive of Insurance, Road Tax and Registration charges) of
the new 2 wheeler and accessories (max. Rs.500/-) or 12 months gross salary,
whichever is less, subject to a maxi of Rs.60000/b) Second hand two wheelers are not eligible for Bank finance.
Repayment:
For four-wheeler:
Maximum 84 months for new Cars and maximum 48 months for old cars. The repayment
period for old cars shall be fixed in such a way that the age of the car plus repayment
period does not exceed 9 years.
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For two-wheeler:
Guarantee:
Suitable 3rd party guarantee. Where the loan is additionally secured upto 100% of the
loan amount, by collaterals like NSCs/ KVPs/IVP/LIC/Pvt. insurance policy/RBI Relief
Bond etc., third party guarantee may be waived.
Other conditions:
a) Hypothecation of vehicle with hypothecation charge noted in the RC Book.
b) Comprehensive insurance for full value of vehicle with Bank clause noted in the
policy bond.
Cutback:
a) 50% or 60% (where cut back exceeds 50% on account of voluntary savings like
contribution to provident fund beyond statutory requirement, LIC etc.) or 70% where
spouse/major children unmarried daughters financially supporting the borrower are also
earning members and under regular employment. Provident fund-both statutory and
voluntary, income tax/professional tax, insurance premium, deductions towards all loans
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Purpose:
Providing financial support to deserving / meritorious students for pursuing higher
education in India and abroad.
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Courses Eligible:
(a) Studies in India :
Approved courses leading to graduate/ post graduate degree and PG diploma
conducted by recognized colleges/ universities recognized by UGC/ Govt./ AICTE/
AIBMS/ ICMR etc.
Courses like ICWA, CA, CFA etc.
Courses conducted by IIMs, IITs, IISc, XLRI. NIFT, NID etc.
Regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc.,
approved by Director General of Civil Aviation/Shipping, if the course is pursued in
India.
Approved courses offered in India by reputed foreign universities.
Other courses leading to diploma/ degree etc. conducted by colleges/ universities
approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc
Courses offered by National Institutes and other reputed private institutions. Banks
may have the system of appraising other institution courses depending on future
prospects/recognition by user institutions.
Courses, which are not covered under the criteria, mentioned above, CMD/ED may
take a view to consider extending Education loan under the scheme taking into
account the future prospects/recognition by user institution.
Teacher training course/Nursing course/B.Ed are eligible for education loan, provided
the training institutions are approved either by the Central Government or by the State
Government and such courses should lead to Degree or Diploma course and not to
certification course.
(b) Studies abroad:
Graduation: For job oriented professional / technical courses offered by reputed
universities.
Post Graduation: MCA, MBA, MS etc.
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Studies abroad
: Nil
Above Rs 4 lakh
: Studies in India - 5%
Studies abroad
: 15%
Security:
Upto Rs.4 lakh: parents to be joint borrowers. No security.
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Rate of Interest:
Interest linked to Loans-Base Rate of the Bank at monthly compounding.
Loan Amount
Upto Rs.4.00 lakhs
Above Rs.4.00 lakhs
Interest rate
Base Rate + 2.25%
Base Rate + 2.75%
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The increasing consumer lifestyle demands a lot. Not everything can be bought and paid for
at once. Consumer Durable finance is an easy way for people to upgrade their lifestyle and
pay in easy & affordable installments.
Eligibility:
Salaried people who have been in the present employment for the past two years.
Professionals who have been working in their particular field for the past two years.
Businessmen who have been in business for the past two years and generate adequate
income and have a good net worth.
Purpose
Purchase of TV, Washing Machine, Refrigerator, Music System, AC's, Furniture etc.
Security
Hypothecation of the article/furniture purchased with Bank finance.
Loan amount eligible :
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75% to 80% of the price quoted in proforma invoice.
Guarantors :
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16
14
12
10
Number of Customer
8
Conclusion:
From the above data we can conclusion that most of the customer of the bank lives in house
is their owned that is 85% and only is 15% costumer of the bank lived in rented house.
Q.2 since how long you are staying in your current house?
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12
10
Number of Customer
8
6
More than 5 Year
3-5 Year
2
1-3 Year
Conclusion:
From the above data we can conclusion the most of the customer of the bank is the less than
1 year is 5% and 1-3 year is 20% and 3-5 year 15% and More than 5 Year 60% .
Q.3 From the following consumer durable product which product you possess?
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25
20
15
Number of Customer
10
Conclusion:
From the above data we can conclusion the most of the customer are interest Laptop is 20%
and Computer is 10% and Washing machine 50% and Air conditioner is 20%.
Q.4 Have you availed any types of loan from any banks or financial institutions?
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16
14
12
10
Number of Customer
8
Conclusion:
From the above data we can conclusion the most of customer is the interest is 20% and80%
not interest.
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Number of Customer
Conclusion:
From the above data the most of customer are Have enough saving is 45% and dont believe
in taking loans is 35% and Loans not available easily is 20%.
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6
Number of Customer
Conclusion:
From the above data we can see the customer is the Scheme and Policy are the 20% and
Interest rate is35% and Services are the 45%.
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12
10
Number of Customer
Conclusion:
From the above data the most of customer are the liable the tax is paid 50% is the yes
and 50% is no.
Q. 8 From the below mentioned banks from which banks you take loan?
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Number of Customer
Conclusion: From the above data most of customer are the taken loan from the banks are
these SBI is the 20% and HDFC is the 20% and ICICI is the 15% and Bank of Baroda is the
giving loan 45% giving loans.
Q. 9 How was the process of loan from the bank you had taken?
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12
10
Number of Customer
Conclusion:
From the above data the customer is the process of loan is taken 55% is easy and 45% is the
Complex.
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10
6
Number of Customer
Conclusion :
From the Above data the customers monthly income is the less than 10,000 is the
45% and 10,000-20,000 is 20% and 20,000-30,000 is the 15% and more than 30,000
is the 20%.
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5
Number of Customer
4
Conclusion :
From the above data the customer is the taking loan is the first time is the 10% and
second time is the 65% and third time is the 25%.
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Consumer loan is one of the most effective credit schemes for the limited income consumers
to make easy their life. People can purchase all of their necessary goods for the consumer
loan system. The consumer loan system is not only helping the consumers but also enabling a
healthy economical status for the nation. But the facilities of consumer loan cannot be
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b. Increasing Human Resources in the Retail Banking: In the retailing banking there
are not enough personnel to serve all the customers. Moreover, the initial
information provided by the clients for loan sanction is required to survey which
demands large number of surveyors. It has been observed that making tight rules,
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ANNEXURE 1
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ANNEXURE 2
BIBLOGRAPHY
WWW. BANK CONSUMER LOAN .COM
HTTP// CONSUMERL LOAN.COM
WWW. EDUCATION LOAN .COM
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